Amicus Curiae Brief — Pacific Mutual Life Insurance v. Haslip

S | KILLED

: No. 89-1279 WAC Sh 88

IN THE aes

Supreme Court of the United States

OCTOBER TERM, 1989

PACIFIC MUTUAL LIFE INSURANCE COMPANY,

‘ Petitioner,

CLEOPATRA HASLIP, CYNTHIA CRAIG,

ALMA M. CALHOUN, AND EDDIE HARGROVE,

Respondents.

On Writ of Certiorari to the Supreme Court of Alabama

AMICUS CURIAE BRIEF OF THE

CHAMBER OF COMMERCE OF THE UNITED STATES,

THE NATIONAL ASSOCIATION OF MANUFACTURERS,

THE CHEMICAL MANUFACTURERS ASSOCIATION,

AND

THE AMERICAN CORPORATE COUNSEL ASSOCIATION,

IN SUPPORT OF PETITIONER

Of Counsel: MALCOLM E. WHEELER

STEPHEN A. BOKAT Counsel of Record

NATIONAL CHAMBER LITIGATION SKADDEN, ARPS, SLATE, MEAGHER

& FLOM

Phe 300 South Grand Avenue

Washington D C. 20062 Los Angeles, California 90071

(202) 463-5337 (213) 687-5000

Counsel for Amici Curiae

JAN S. AMUNDSON f

General Counsel

NATIONAL ASSOCIATION

OF MANUFACTURERS

1331 Pennsylvania Ave., N.W.

Washington, D.C. 20036

(202) 637-3058

[Of Counsel Continued

on Inside Cover]

May 31, 1990

————

WILSON - EPES PRINTING Co., INC. - 789-0096 - WASHINGTON, D.C. 20001

DAVID F.. ZOLL

Vice President and General Counsel

CHEMICAL MANUFACTURERS ASSOCIATION

2501 M Street, N.W.

Washington, D.C. 20037

(202) 887-1100

NANCY NORD

AMERICAN CORPORATE COUNSEL ASSOCIATION

1225 Connecticut Avenue, N.W.

Washington, D.C. 20036

(202) 296-4522

TABLE OF CONTENTS

SUMMARY OF THE PUNITIVE DAMAGES

Neen ccevesecusceccsessecsers

A.

B.

Purposes of Punitive Damages ........

Procedural Characteristics of Punitive Damages

Proceedings ............... ro a

1. The Absence of Standards to Guide Juries in

Deciding Whether to Award Punitive Dam-

ages, Once the Requisite Culpability Has

Been Found ........... Riatddeeddeeads a .,

2. The Absence of Standards to Limit or Guide

Juries in Determining What Sum to Award

as Punitive Damages _....02....0.000 eee

3. The Absence of an Objective Standard for

Judicial Review of Punitive Damages Ver-

ES SA

C. Effects of the Current Punitive Damages

he Ee

Neen eensesenmscnuoooonnecs

I. ALABAMA’S STANDARDLESS PROCE-

DURES FOR IMPOSING PUNITIVE DAM-

AGES FAIL TO PROVIDE DUE PROCESS

STi cibecabiessenisensecsencseoncveenscestsccerscoeeees

A. Alabama Fails to Provide Safeguards

Against the Arbitrary and Invidiously Dis-

criminatory Infliction of Punitive Damages..

13

13

13

ii

TABLE OF CONTENTS—Continued

B. Alabama’s Punitive Damages Laws Fail to

Provide Adequate Notice of Who Will Be

Punished or of the Penal Consequences of

Conduct that May Be Punished ....................

II. DUE PROCESS REQUIRES THAT ALABAMA

ESTABLISH LEGAL STANDARDS TO DE-

TERMINE WHEN AND IN WHAT AMOUNT

PUNITIVE DAMAGES ARE TO BE IN-

FLICTED

CONCLUSION

EEE EEE EEE EEE EEE EEE OO OEE ne

Page

21

iii

TABLE OF AUTHORITIES

CASES Page

Federal Cases

Albernaz v. United States, 450 U.S. 333 (1981)... 21

Bifulco v. United States, 447 U.S. 381 (1980) ........ 21

Browning-Ferris Indus. v. Kelco Dispesal, Inc.,

RE ee 6, 11

Bankers Life & Cas. Co. v. Crenshaw, 108 S. Ct.

I SI isisiictticicdacinsiiapiicesbiteaisiimniiiinae 19

Burger King Corp. v. Rudzewicz, 471 U.S. 462

ee a ee 21

Calder v. Bull, 3 U.S. (1 Dall.) 386 (1798) -........ 22

Chaplin Refining Co. v. Corporation Commission,

BR! ERS EN 22

City of Newport v. Fact Concerts, Inc., 453 U.S.

Re ace checliin ts accisdiiadiciis tei naeii dete rnageabia bianca 14

Cline v. Frink Dairy Co., 274 U.S. 445 (1927) ...... 22

Coates v. Cincinnati, 402 U.S. 611 (1971) -........... 16

Daniels v. Williams, 474 U.S. 327 (1986) -........... 13

FDIC v. W.R. Grace Co., 691 F. Supp. 87 (N.D.

Ill. 1988), aff’d in part, rev’d in part, 877 F.2d

614 (1989), cert. denied, 110 S. Ct. 1524

(RESORT ORC AO Be 2S BRAN S OD OE Tee a DA a 10

Furman v. Georgia, 408 U.S. 238 (1972) ............ 23

Gertz v. Robert Welch, Inc., 418 U.S. 323

I i easels 14, 20

Giaccio v. Pennsylvania, 382 U.S. 399 (1966) ....15, 16, 21

Gregg v. Georgia, 428 U.S. 153 (1976) -................ 15, 20

Grayned v. City of Rockford, 408 U.S. 104

SRT A ee we ce Sac ee Se i a RS ee 16

Hoffman Estates v. Flipside, Hoffman Estates,

ee FE ee eee 15

Hurtado v. California, 110 U.S. 516 (1884) ........ 13

In re Medley, 134 U.S. 160 (1890) ~.........0............ 22

In re Paris Air Crash, 622 F.2d 1315 (9th Cir.),

cert. denied, 449 U.S. 976 (1980) ........................ 27

In re Winship, 397 U.S. 358 (1970) ........................ 27

International Brotherhood of Electrical Workers

or, Peel, GE Ts Ge Ge cccccciccecsescrcccntesescsenne 14

Interstate Circuit, Inc. v. Dallas, 390 U.S. 676

UII «jn cecobiteianiaceatathishiiiniciusltiahinciassineinnansebmdeamabenndioinhidais 16

iv

TABLE OF AUTHORITIES—Continued

Page

Kociemba v. G.D. Searle & Co., 16 Prod. Safety

& Liab. Rep. (BNA) 893 (D. Minn. Sept. 19,

BE TL I cn oe B05 10

Kolender v. Lawson, 461 U.S. 352 (1983) .............. 15, 21

Lindsey v. Washington, 301 U.S. 397 (1937) ........ 22

Mathews v. Eldridge, 424 U.S. 319 (1976) ............ 26

McGautha v. California, 402 U.S. 183 (1971) ........ 19

Rajala v. Allied Corp., No. 82-228K (D. Kan.

Apr. 25, 1988), appeal docketed (10th Cir. May

BEE EE A 10

Roberts v. United States Jaycees, 468 U.S. 609

ls ee Aen ON) 75 ON eRe 15, 17, 21

Robinson v. California, 370 U.S. 660 (1962) ....... 16

Rosenbloom v. Metromedia, Inc., 403 U.S. 29

IR TRAS A ane A AD Rane Ree 14

Santosky v. Kramer, 455 U.S. 745 (1982) 16

Small Co. v. American Sugar Ref. Co., 267 U.S.

Be EE Gece ee ee ee 22

Smith v. Wade, 461 U.S. 30 (1983) Rh neon eae 14

United States v. Batchelder, 442 U.S. 114

REET Ee = AVA GER IE SB NS Re OWE a: 16, 20, 21

United States v. Evans, 333 U.S. 483 (1948) __..... 20

Wisconsin v. Constantineau, 400 U.S. 433 (1971).. 27

Woodson v. North Carolina, 428 U.S. 280 (1976) .... 20

World-Wide Volkswagen Corp. v. Woodson, 444

a RTD, ss 21

Yick Wo v. Hopkins, 118 U.S. 356 (1886) ............. 15, 19

State Cases

Advertiser Co. v. Jones, 169 Ala. 196, 53 So. 759

RITE cial asncsaiintaslebashicansbesthhibadsb lithe dhiicte ais tacit, 6

Alabama Power Co. v. Rembert, 208 So. 2d 205

id 5

Austin v. Tennessee Biscuit Co., 52 So. 2d 190

ON RES OLE es A ee 5

Batteast v. Wyeth Laboratories, Inc., 172 Ill. App.

3d 114, 526 N.E. 2d 428, appeal granted, 123

Ill. 2d 556, 128 Ill. Dec. 887, 535 N.E. 2d 398

IIE .cetonsidindauniadbimn micas kee ta es oe en 10

v

TABLE OF AUTHORITIES—Continued

Page

Braley v. Berkshire Mut. Ins. Co., 440 A.2d 359

I Tl ..ccasnennintlaiensiietelaieaieciiainimasni 25

Brown v. Superior Court, 44 Cal. ‘3d 1049, 245 Cal.

Rptr. 412, 751 P.2d 470 (1988) a a oe 11-12

City Bank of Alabama v. Eskridge, 521 So. 2d

I di eliseienetiediiatieiants 6

Elam v. Alcolac, Inc., 765 S.W.2d 42 (Mo. App.

IT chs sh ce eesnaielehgcidgeaineestiiidi 10

Foss v. Maine Turnpike Authority, 309 A. 2d 339

(Me. 1978) .......... Dos ET EE PEN. Env 25

Hammond v. City of Gadsden, 493 So. 2d 1374

CI, TID ssceanetntiinrciicenatentensialnineganemnsninniintiaieepnaes 7, 8,9

Hines v. Ariens Co., (Tex. Dist. Ct. July 22, 1988)

(reported in The 10 Largest Jury Verdicts of

1988, A.B.A. J., Mar. 1989, at 45) -................... 10

K-Mart Corp. v. Weston, 530 So. 2d 736 (Ala.

ASPEN ee SRR tos ee NOE eT ee TC 6

Mancari v. Raymark Indus. Inc., 16 Prod. Safety

& Liab. Rep. (BNA) 318 (Del. Super. Ct. Mar.

a lacie 10

Maryland Casualty Co. v. Tiffin, 537 So. 2d 469

A TID sa cccsiseaihssniccssnsnihccetgraabsnbenonaiiiniiadsininidibeiaaesabanaiens 4,6

Masaki v. General Motors Corp., 16 Prod. Safety

& Liab. Rep. (BNA) 225 (Haw. Ct. App. Feb.

29, 1988), rev'd, 780 P.2d 566 (Haw. 1989) ........ 10

Pacific Mutual Life Ins. Co. v. Haslip, 553 So. 2d

I I sich cot cel cteheealaiiateehecaibaiatnions 7

Roberson v. Ammons, 477 So. 2d 957 (Ala. 1985) .. 7

Roberts v. Seven-Up, 16 Prod. Safety & Liab. Rep.

(BNA) 466 (Utah Dist. Ct. Feb. 18, 1988)........ 10

Toole v. Richardson-Merrell, Inc., 251 Cal. App.

2d 689, 60 Cal. Rptr. 398 (1967) .......................-. 10

U-Haul Co. v. Long, 882 So. 2d 545 (Ala. 1980) .... 7

STATUTES

I ii it chlihitnlialateialili 19

BE IID io snassincecssisnariesmesamnonmmeciensiiansanatiennnnns 20

I I ID viicnceinicsiidinsnnncnsocincinvdestintininedaiinniiation 20

Se I inccacnennscnnnssncenstamistinssnctncsennscatinianneie 19

vi

TABLE OF AUTHORITIES—Continued

Page

Alm. Cote © QeBGO6 nn nnn essere ceeeeecereees 19

pS RA TEE 19

BE eee 19

BELTS A a 19

ETT SO 19

EE VO - ED 19

OTHER AUTHORITIES

Connell, The Crisis in Contraception, 1987 Tech-

I iiniciesisncisierncisictnnnspiteteninbnsalhtinineicsdaanam 12

Dobbs, Ending Punishment in “Punitive” Dam-

ages: Deterrence-Measured Remedies, 40 Ala.

Bis i I ceed 7

Ellis, Fairness and Efficiency in the Law of Puni-

tive Damages, 56 S. Cal. L. Rev. 1 (1982)........ 18

Ellis, Punitive Damages, Due Process, and the

Jury, 40 Ala. L. Rev. $75 (1989) 2.000.000. 7

Elliott, Why Punitive Damages Don’t Deter Cor-

porate Misconduct Effectively, 40 Ala. L. Rev.

I SRERTE STERN s otk come on Oe a 17, 24

Franklin & Mais, Tort Law and Mass Immuniza-

EO 11

D. Hensler, M. Vaiana, J. Kakalik & M. Peter-

son, Trends in Tort Litigation: The Story Be-

hind the Statistics (1987) -2........020.0.0ccccccee eee 9,11

Mahoney, Punitive Damages: The Courts Are

Curbing Creativity, N.Y. Times, Dec. 11, 1988,

Se I 12

Morris, Punitive Damages in Tort Cases, 44

Harv. UL. Rev. 1173 (1987) 2.0.00... eee eee 25

Note, Punitive Damages for Libel, 98 Harv. L.

i 18

H. Packer, The Limits of the Criminal Sanction

RAEI EA REE Oo OE ona ac er oe 18

M. Peterson, S. Sarma & M. Stanley, Punitive

Damages: Empirical Findings (1987) _........... 10

W. Prosser & W.P. Keeton, The Law of Torts

NUE EY SEE Giadinchiinaadbinieiie aie eee 5

vii

TABLE OF AUTHORITIES—Continued

Page

Twerski, A Moderate and Restrained Federal

Product Liability Bill: Targeting the Crisis

Areas for Resolution, 18 U. Mich. J.L. Ref.

I a salsaliatiaieiie 12

Wheeler, The Constitutional Case for Reforming

Punitive Damage Procedures, 69 Va. L. Rev.

ic a cirereitd 4, 25, 27

Wheeler, A Proposc! for Further Common Law

Development of the Use of Punitive Damages

in Modern Product Liability Litigation, 40 Ala.

I Ra I ates tltatiienesien 18

Wheeler, Toward a Theory of Limited Punish-

ment: An Examination of the Eighth Amend-

ment, 24 Stan. L. Rev. 838 (1972) —.......0000..... 18

U.S. Department of Justice, An Update on the

Liability Crisis: Tort Policy Working Group

a 11,12

IN THE

Supreme Court of the United States

OCTOBER TERM, 1989

No. 89-1279

PACIFIC MUTUAL LIFE INSURANCE COMPANY,

= Petitioner,

CLEOPATRA HASLIP, CYNTHIA CRAIG,

ALMA M. CALHOUN, AND EDDIE HARGROVE,

Respondents.

On Writ of Certiorari to the Supreme Court of Alabama

AMICUS CURIAE BRIEF OF THE

CHAMBER OF COMMERCE OF THE UNITED STATES,

THE NATIONAL ASSOCIATION OF MANUFACTURERS,

THE CHEMICAL MANUFACTURERS ASSOCIATION,

AND

THE AMERICAN CORPORATE COUNSEL ASSOCIATION,

IN SUPPORT OF PETITIONER

STATEMENT OF INTEREST

The Chamber of Commerce of the United States, the

National Association of Manufacturers, the Chemical

Manufacturers Association, and the American Corporate

Counsel Association, with the consent of the parties, file

this brief as amici curiae in support of the petitioner.*

The United States Chamber of Commerce is America’s

largest federation of businesses, representing more than

* Consent letters have been filed with the Clerk.

2

180,000 companies, several thousand trade and profes-

sional associations, and hundreds of state and local Cham-

bers of Commerce. The National Association of Manu-

facturers is an association of approximately 13,500 com-

panies and subsidiaries that together employ 85% of all

manufacturing workers in the United States and produce

more than 80% of the nation’s manufactured goods. The

Chemical Manufacturers Association is a non-profit trade

association whose member companies produce, market,

and use industrial chemicals. Its member companies com-

prise 90% of the production capacity of basic industrial

chemicals in the United States. The American Corporate

Counsel Association is a national bar association of ap-

proximately 8,000 attorneys from the legal staffs of cor-

porations and other business entities in the private sector

who are called upon to advise their clients regarding liti-

gation and settlement of claims filed against their clients.

This case is of interest to these amici because business

entities are among the primary victims of unpredictable

and arbitrary punitive damages verdicts that have been

awarded without adequate procedural safeguards, with

increasing frequency, and in dramatically larger sums

in recent years. As principal voices of the business and

manufacturing communities, these amici are well suited

to present to the Court the effects, and the due process

infirmities, of a system that allows punitive damages to

be imposed by juries without guidance or specified re-

strictions as to when and in what amount such punish-

ment should be inflicted.

SUMMARY OF ARGUMENT

In punitive damages proceedings in Alabama, once the

defendant has been found to have committed a punishable

act, juries have, and are told that they have, total discre-

tion in deciding whether to withhold or impose punitive

damages. Juries also are told that the amount of punitive

damages is a matter for their discretion. Juries are told

ee

that the purposes of punitive damages are to punish and

deter, but those terms are not defined, the limitations dic-

tated by deterrent and retributive principles are not iden-

tified, and the information needed to apply those princi-

ples is not provided. Nor is any other standard, limit, or

guidance provided.

The process of judicial review does not cure these defi-

ciencies, because that process is equally standardless. Al-

though trial courts are required to state reasons for grant-

ing or denying motions for remittitur and new trials,

punitive damages verdicts are allowed to stand unless

the “judicial conscience” is “shocked” by the excessiveness

of the verdict or by proof of “bias, passion, corruption, or

other improper motive.”

Because of this absence of standards at every level,

both the imposition of any punitive award and the size

of the punitive award that may follow from any contem-

plated act are entirely unpredictable. There is no con-

sistency of verdicts. And the license given to juries in-

vites and yields decisions that are arbitrary, invidiously

discriminatory, and subject to no meaningful judicial

review.

These punitive damages proceedings provide a paradigm

of what the Due Process Clause of the Fourteenth Amend-

ment seeks to prevent: the use of unduly vague laws to

subject citizens to deprivation and punishment. Alabama

therefore should be required to adopt punitive damages

standards, either legislative or common law, that provide

greater specificity and predictability and that more care

fully guard against arbitrary and invidiously discrimina-

tory punishment. The adoption of such standards not

only will better safeguard defendants’ rights, but will

better serve the state’s legitimate interests in achieving

proper deterrence and punishment in a judicially efficient

manner.

4

SUMMARY OF THE PUNITIVE DAMAGES SYSTEM

The purposes, procedural characteristics, and results of

punitive damages proceedings in the State of Alabama,

and in like jurisdictions, are central to the due process

issue addressed in this brief. They are as follows.

A. Purposes of Punitive Damages

Punitive damages in Alabama, as elsewhere, are penal

in nature. The trial court in this case instructed the jury

that punitive damages are “to punish the defendant” and

“to make an example” and are “not to compensate the

plaintiff for any injury.” (Tr. 897.) See Maryland Cas-

ualty Co. v. Tiffin, 537 So. 2d 469, 471 (Ala. 1988) (“the

purpose of punitive damages is not to compensate the

plaintiff but to punish the wrongdoer and to deter others

from committing similar wrongs in the future”).

B. Procedural Characteristics of Punitive Damages Pro-

ceedings

The punitive damages system in Alabama, like the puni-

tive damages systems in most other states, is character-

ized by the absence of standards at three levels: (1) The

absence of standards given to juries to guide them in

deciding whether punitive damages should be awarded,

once the requisite culpability has been found; (2) the

absence of standards given to juries to guide them in

determining the appropriate size for a punitive damages

award; and (3) the absence of objective standards for

judicial review of juries’ punitive damages verdicts. All

of these procedural infirmities infected the proceedings in

this case.’

1 Alabama punitive damages proceedings suffer from other pro-

cedural infirmities as well. These include a fa:lure to require proof

of the punitive damages claims by more than a mere preponder-

ance of the evidence and a failure to require that the punitive

damages, or “sentencing,” issues be tried only after underlying

tort liability has been found. See generally Wheeler, The Consti-

tutional Case for Reforming Punitive Damage Procedures, 69 Va.

L. Rev. 269, 276-322 (1983).

5

1. The Absence of Standards to Guide Juries in Deciding

Whether to Award Punitive Damages, Once the Requi-

site Culpability Has Been Found

Once it has determined that a defendant committed an

act that permits an award of punitive damages, an Ala-

bama jury has unbridled discretion to award or withhold

punitive damages. The jury is given no standard and

no guideline that tells it how it must or must not

exercise that discretion. The jury is simply instructed

that it may award punitive damages if it finds that the

defendant acted with the requisite culpability. Here, for

example, the jury was told:

Now, if you find that fraud was perpetrated then

in addition to compensatory damages you may in

your discretion, when I use the word discretion, I

sey you don’t have to even find fraud, you wouldn’t

have to, but you may, the law says you may award

an amount of money known as punitive damages ....

So, if you feel [—] or not feel, but if you are rea-

sonably satisfied from the evidence [—] that the

plaintiff you are talking about has had a fraud per-

petrated upon them and as a direct result they were

injured and in addition to compensatory damages

you may in your discretion award punitive dam-

ages .... Imposition of punitive damages is en-

tirely discretionary with the jury....

(Tr. 897-98.) See Alabama Power Co. v. Rembert, 208

So. 2d 205, 206 (Ala. 1968); Austin v. Tennessee Bis-

cuit Co., 52 So. 2d 190, 194 (Ala. 1951); W. Prosser &

W.P. Keeton, The Law of Torts § 3, at 14 (5th ed. 1984).

2. The Absence of Standards to Limit or Guide Juries in

Determining What Sum to Award as Punitive Damages

Alabama, like most other states, also provides no stand-

ard to limit or guide juries in determining what amount

to award as punitive damages, once the decision to award

some punitive damages has been made. Although the

dual purposes of deterrence and punishment may be stated

6

to the jury, no definition of either term is provided, and

no explanation of the limits that deterrent and retribu-

tive principles dictate is articulated. The only additional

information provided by the trial court in this case, for

example, was as follows:

Should you award punitive damages, in fixing the

amount, you must take into consideration the charac-

ter and the degree of the wrong as shown by the

evidence and necessity of preventing similar wrong.

(Tr. 898.) See Maryland Casualty Co. v. Tiffin, 537 So.

2d 469, 471 (Ala. 1988).

This absence of standards and guidance reflects a stark

fact of Alabama law: “There is no legal measure of [pu-

nitive] damages” in Alabama. K-Mart Corp. v. Weston,

530 So. 2d 736, 740 (Ala. 1988) (quoting Advertiser Co.

v. Jones, 169 Ala. 196, 209, 53 So. 759, 764 (1910) ).

Punitive damages “need bear no relationship to actual

damages, and their award is left largely to the discretion

of the jury.” City Bank of Alabama v. Eskridge, 521

So. 2d 931, 933 (Ala. 1988). See Browning-Ferris Indus.

v. Kelco Disposal, Inc., 109 §. Ct. 2909, 2923 (1989)

(Vermont law) (“punitive damages are imposed by juries

guided by little more than an admonition to do what they

think is best”) (Brennan & Marshall, JJ., concurring).

Thus, no maximum award is specified by the legisla-

ture or by the courts. No relationship between the harm

caused and the size of the punitive award is required or

suggested. No proportionality between the punishment

imposed in one ease for one type of wrongful conduct and

the punishment imposed in other cases for other types of

conduct is required or suggested. No similarity between

the punishment imposed in one case for particular con-

duct and the punishment imposed in other cases for iden-

tical or similar conduct is required or suggested. No

instruction is given as to what must be considered or

what must not be considered in determining the amount

7

of punishment. No instruction regarding the deterrent

effects of compensatory damages and litigation costs is

given, and juries are not told that they must, should, or

may consider those effects. No information about statu-

tory civil penalties and criminal fines for similar and

dissimilar conduct is given. The jury is not even told

that it must refrain from awarding more than is neces-

sary to achieve the proper amount of deterrence and

punishment.’

3. The Absence of an Objective Standard fer Judicial

Review of Punitive Damages Verdicts

In deciding whether to grant a motion for remittitur

or a new trial attacking a punitive damages verdict

awarded pursuant to the standardless proceedings de-

scribed above, courts follow the rule that juries’ puni-

tive damages verdicts “are presumed correct.” Pacific

Mutual Life Ins. Co. v. Haslip, 553 So. 2d 537, 543 (Ala.

1989). Remittitur or a new trial may be ordered

only where the record establishes that the award is

excessive or inadequate as a matter of law, or where

it is established and reflected in the record that the

verdict is based upon bias, passion, corruption, or

other improper motive... .

Hammond v. City of Gadsden, 493 So. 2d 1374, 1379

(Ala. 1986). Whether a punitive damages award is ex-

cessive “depends upon whether or not the judicial con-

science is shocked.” Roberson v. Ammons, 477 So. 2d

957, 961 (Ala. 1985) (quoting U-Haul Co. v. Long, 382

So. 2d 545, 548 (Ala. 1980) ). Thus, although trial courts

must “reflect in the record the reasons for interfering

2 “Instructions range from a kind of verbal shrug of the should-

ers to the pious and flabby abstractions .... The short version

might be, ‘Do right, be good.’” Dobbs, Ending Punishment in

“Punitive” Damayes: Deterrence-Measured Remedies, 40 Ala. L.

Rev. 831, 872 n.102 (1989). See Ellis, Punitive Damages, Due

Process, and the Jury, 40 Ala. L. Rev. 975, 979 (1989) (“stated

criteria employed for imposing punitive damages comprise a mul-

tiplicity of vague, overlapping terms”).

8

with a jury verdict, or refusing to do so,” Hammond v.

City of Gadsden, 493 So. 2d at 1379, judicial review re-

mains as standardless as the juries’ initial determina-

tions.*

%In Hammond the Alabama Supreme Court identified only four

factors that it labeled “appropriate for the trial court’s considera-

tion”: (1) “The culpability of the defendant’s conduct”; (2) “the

desirability of discouraging others from similar conduct”; (3)

“the impact upon the parties”; and (4) “the impact on innocent

third parties.” 493 So. 2d at 1379. That list is little more than a

restatement of the rule that punitive damages are imposed to

punish and to deter. It neither identifies the limiting principles

of deterrent and retributive doctrines nor reveals the sources or

types of information that is to be considered.

More importantly, immediately after having listed the four fac-

tors “appropriate for the trial court’s consideration,” the supreme

court stated: “In adopting this new procedure, we emphasize that

no substantial rule of law is changed. A trial court may not con-

ditionally reduce a jury verdict merely because it believes the

verdict overcompensates the plaintiff; nor may the trial court sub-

stitute its judgment for that of the jury .... We simply now

require the trial court to state for the record the factors con-

sidered in either granting or denying a motion for new trial... .”

Id. (citations omitted).

Thus, the required listing of factors does nothing to search out

or prevent arbitrary, discriminatory, or otherwise unjust verdicts.

Quite to the contrary, it serves as a tool for appellate courts to

use to pr vent trial courts from modifying jury verdicts.

In addition, almost any statement by a trial court in support of

a denial of a motion for remittitur will satisfy the Hammond re-

quirement. In this case, for example, the trial court gave only

three reasons why the seven-figure punishment of Pacific Mutual

was proper: (1) “It goes without saying that it is highly de

sirable to discourage others, similarly situated from similar con-

duct” [i.e., conduct similar to that of Mr. Ruffin, whose unau-

thorized theft of premiums made Pacific Mutual a victim]; (2)

“The jury seems to fashioned [sic] their awards in proportion

to the damage done each plaintiff” [i.e., the awards within the one

case were proportional to each other, but may or may not have been

proportional when compared to other awards, to relevant civil and

criminal penalties, or to any other guideline]; and (3) “The jury

was composed of male and female, white and black.” (Petition

for Writ of Certiorari at A-15.)

9

No objective criterion has been articulated to provide

guidance or predictability as to when the “judicial con-

science” is likely to be “shocked.” No objective criterion

has been articulated to provide guidance or predictability

as to how or when a court is likely to find that a dam-

ages award is based on “bias” or “passion.”

Unlike courts in criminal proceedings and actions for

civil penalties, courts reviewing punitive damages awards

receive no standard, limitation, or guidance from the leg-

islature. Courts, like juries, do not consider the presence

or absence of proportionality between the punitive dam-

ages awards in similar or dissimilar cases. Courts, like

juries, do not consider the level or availability of crim-

inal fines and civil penalties for similar and dissimilar

conduct. Courts, like juries, do not consider the deterrent

effect of compensatory damages, defense costs, or regula-

tory proceedings arising out of the same conduct. In-

stead, given that juries are not instructed to consider any

of those matters, it apparently would be error for a court

to order remittitur or a new trial on the basis of any of

them, because the court may not “substitute its judgment

for that of the jury.” Hammond v. City of Gadsden, 493

So. 2d at 1379.

C. Effects of the Current Punitive Damages System

A comprehensive analysis of jury verdicts in the

United States, prepared by the RAND Institute for Civil

Justice, shows that the growth in the average award in

the types of tort litigation that manufacturers commonly

face “has been truly explosive, reflecting increases rang-

ing from 200 to more than 1000 percent” from the period

1960-1964 to 1980-1984. D. Hensler, M. Vaiana, J. Ka-

kalik & M. Peterson, Trends in Tort Litigation: The

Story Behind the Statistics, 18 (1987). That explosion

has been paralleled by a dramatic increase in both the

frequency and the size of punitive damages awards

against manufacturers.

10

Before 1970, for example, there was only one reported

appellate court decision upholding an award of punitive

damages in a product liability case—an award of

$250,000. See Toole v. Richardson-Merrell, Inc., 251 Cal.

App. 2d 689, 60 Cal. Rptr. 398 (1967). Today, hardly a

month goes by without a multi-million dollar punitive

damages verdict against a manufacturer.‘

Researchers for the RAND Institute for Civil Justice

also have empirically determined that “|c]orporate de-

fendants are ... more likely than individuals or public

agencies to be the target of [punitive damages! awards.”

M. Peterson, S. Sarma & M. Stanley, Punitive Damages:

Empirical Findings iii (1987). Not only are businesses

thus more frequently targeted, but “|p]unitive awards

against businesses were far larger than those against

individuals in both personal injury and business/contract

eases.” Id. at 50. The net result has been systematic

4 See, e.g., the following reportea verdicts in 1988: Rajala v.

Allied Corp., No. 82-228K (D. Kan. Apr. 25, 1988), appeal docketed

(10th Cir. May 9, 1988) ($60 million punitive damages verdict) ;

Masaki v. General Motors Corp., 16 Prod. Safety & Liab. Rep.

(BNA) 225 (Haw. Ct. App. Feb. 29, 1988) ($11.25 million puni-

tive damages verdict), rev'd, 780 P.2d 566 (Haw. 1989); Batteast

v. Wyeth Laboratories, Inc., 172 Ill. App. 3d 114, 526 N.E.2d 428

($13 million punitive damages verdict), appeal granted, 123 Ill.

2d 556, 128 Ill. Dec. 887, 535 N.E.2d 398 (1988); FDIC v. W.R.

Grace Co., 691 F. Supp. 87 (N.D. Ill. 1988) ($75 million punitive

damages verdict), aff'd in part, rev'd in part, 877 F.2d 614 (1989),

cert. denied, 110 S. Ct. 1524 (1990); Kociemba v. G.D. Searle &

Co., 16 Prod. Safety & Liab. Rep. (BNA) 893 (D. Minn. Sept. 19,

1988) ($7 million punitive damages verdict) ; Roberts v. Seven-Up,

16 Prod. Safety & Liab. Rep. (BNA) 466 (Utah Dist. Ct. Feb. 18,

1988) ($10 million punitive damages verdict, remitted to $300,000) ;

Mancari v. Raymark Indus. Inc., 16 Prod. Safety & Liab. Rep.

(BNA) 318 (Del. Super. Ct. Mar 17, 1988) ($22 million punitive

damages verdict, new trial granted); Elam v. Alcolac, Inc., 765

S.W.2d 42 (Mo. App. 1988) ($42.9 million punitive damages ver-

dict, new trial granted); Hines v. Ariens Co. (Tex. Dist. Ct. July

22, 1988) ($5 million punitive damages verdict) (reported in The

10 Largest Jury Verdicts of 1988, A.B.A. J., Mar. 1989, at 45, 47).

11

discrimination against business defendants: “Juries also

award more money when the defendants ave institutions

or organizations rather than individuals—the ‘deep-

pocket’ effect. ... [Wle can detect a separate, statis-

tically independent effect for deep-pocket defendants,

even in cases that do not involve products or malprac-

tice.” D. Hensler, M. Vaiana, J. Kakalik, M. Peterson,

Trends in Tort Litigation: The Story Behind the Statis-

tics 21 (1987).

The effect of these massive and discriminatory puni-

tive awards on American industry, and indirectly on the

American public, has been devastating. Cf. Browning-

Ferris Indus. v. Kelco Disposal, Inc., 109 S. Ct. 2909,

2924 (1989) (“The threat of such enormous awards has

a detrimental effect on the research and development of

new products”) (O’Connor & Scalia, JJ., concurring).

Important health products have drastically risen in price

or been withdrawn from the market altogether. See

Brown v. Superior Court, 44 Cal. 3d 1049, 1064, 245 Cal.

Rptr. 412, 421, 751 P.2d 470, 479 (1988) (discussing

withdrawal of Bendectin from market after price in-

creased by more than 300 percent; also discussing with-

drawal of all but two manufacturers of diphtheria-

pertussis-tetanus vaccine, and price increase from eleven

cents per dose to $11.40 per dose in four years) ; Frank-

lin & Mais, Tort Law and Mass Immunization Programs

(1977) (discussing drug manufacturers’ refusal to sup-

ply influenza vaccine until Government assumed the risk

of lawsuits resulting from injuries caused by the vac-

cine); U.S. Department of Justice, An Update on the

Liability Crisis: Tort Policy Working Group 51 (1987)

(stating that an $8 million punitive damages award

“almost jeopardized the viability of the entire polio vac-

cination program,” but was reversed).

Equally important new products have been withheld

from introduction altogether. See Brown v. Superior

Court, 44 Cal. 3d at 1065, 245 Cal. Rptr. at 421, 751

12

P.2d at 480 (discussing non-introduction of new drug

for the treatment of vision problems because of unavail-

ability of adequate liability insurance) ; Mahoney, Puni-

tive Damages: The Courts Are Curbing Creativity, N.Y.

Times, Dec. 11, 1988, § 3, at 3, col. 1 (possible substitute

for asbestos abandoned “just before commercialization”’

because of punitive damages/tort system). American

manufacturers have fallen behind in the development of

major product groups. See, e.g., Connell, The Crisis in

Contraception, 1987 Technology Review 47 (statement

by Elizabeth B. Connell, M.D., member of FDA Obstet=

rics and Gynecology Advisory Committee, that “the United

States is losing its leadership role in this area of con-

traceptive technology—with potentially disastrous conse-

quences for women and men in this country and else-

where’’).

A study conducted by the United States Department of

Justice on the liability crisis indicated that the prevail-

ing punitive damages systems also “serve as a significant

obstacle to the settlement process by giving the plaintiff

unrealistic expectations of the value of his case even

where the defendant has made a generous settlement of-

fer.” See U.S. Department of Justice, An Update on the

Liability Crisis: Tort Policy Working Group, supra, at

51. “It is close to impossible to negotiate sensibly with

a plaintiff who believes that he can shoot for the moon.”

Id. (quoting Twerski, A Moderate and Restrained Fed-

eral Product Liability Bill: Targeting the Crisis Areas

for Resolution, 18 U. Mich. J.L. Ref. 575, 612 (1985) ).

13

ARGUMENT

I, ALABAMA’S STANDARDLESS PROCEDURES FOR

IMPOSING PUNITIVE DAMAGES FAIL TO PRO-

VIDE DUE PROCESS OF LAW

If one were to set out to design a system of punish-

ment with the least amount of notice, consistency, and

predictability, the greatest likelihood of arbitrariness and

invidious discrimination, and the least likelihood of prop-

erly serving the goals of optimal deterrence and retribu-

tion, one surely would design a system that makes no

attempt to relate the size or frequency of punishment to

the avowed purposes of deterrence and retribution. The

sentencing entity would have, and would be told that it

has, unfettered discretion to withhold or inflict punish-

ment, once the triggering conduct had been established.

The sentencing entity also would have, and would be

told that it has, unfettered discretion to inflict punish-

ment in any amount that it wished. The Alabama puni-

tive damages system is just such a system.

This system violates the Due Process Clause of the

Fourteenth Amendment for three reasons. It fails to pro-

vide safeguards against arbitrary and invidiously dis-

criminatory punishment. It fails to provide notice of

who will be punished. And it fails to provide notice of

the penal consequences of conduct that may be punished.

A. Alabama Fails to Provide Safeguards Against the

Arbitrary ard Invidiously Discriminatory Infliction

of Punitive Damages

This Court long ago established that the Due Process

Clause of the Fourteenth Amendment was “intended to

secure the individual from the arbitrary exercise of the

powers of government.” Daniels v. Williams, 474 US.

327, 331 (1986), quoting Hurtado v. California, 110 U:S.

516, 527 (1884). In opinions spanning a period of al-

most twenty years, most of the members of this Court

14

have recognized that the prevailing punitive damages sys-

tem fails to satisfy that requirement. See Gertz v. Rob-

ert Welch, Inc., 418 U.S. 323, 350 (1974) (punitive dam-

ages laws leave juries “free to use their discretion selec-

tively to punish expressions of unpopular views’’) (Powell,

J., joined by Marshall, Blackmun, & Rehnquist, JJ.) ;

International Brotherhood of Electrical Workers v. Foust,

442 U.S. 42, 50 n.14 (1979) (“punitive damages may

be employed to punish unpopular defendants”) (Mar-

shall, J., joined by Brennan, Stewart, White, & Powell,

JJ.); Smith v. Wade, 461 U.S. 30, 59 (1983) (“punitive

damages are frequently based upon the caprice and preju-

dice of jurors”) (Rehnquist, J., joined by Burger, C.J.,

and Powell, J., dissenting) ; cf. City of Newport v. Fact

Concerts, Inc., 453 U.S. 247, 270 (1981) (“Because evi-

dence of a tortfeasor’s wealth is traditionally admissible

as a measure of the amount of punitive damages that

should be awarded, the unlimited taxing power of a mu-

nicipality may have a prejudicial impact on the jury, in

effect encouraging it to impose a sizable award.”’) ( Black-

mun, J., joined by Burger, C.J., and Stewart, White,

Powell, & Rehnquist, JJ.); Rosenbloom v. Metromedia,

Inc., 403 U.S. 29, 74-75 (1971) (when punitive damages

“bear no relationship to the actual harm caused, they

then serve essentially as springboards to jury assess-

ment, without reference to the primary legitimating com-

pensatory function of the system, of an infinitely wide

range of penalties wholly unpredictable in amount... .

Further, I find it difficult to fathom why it may be neces-

sary, in order to achieve its justifiable deterrence goals,

for the States to permit punitive damages that bear no

discernible relationship to the actual harm caused”)

(Harlan, J., dissenting); id. at 84 (“This discretion al-

lows juries to penalize heavily the unorthodox and the

unpopular and exact little from others.”) (Marshall, J.,

dissenting).

Nevertheless, most states have failed to cure the sys-

temic infirmities that have led to the rash of punitive

15

damages awards described in the Summary of the Puni-

tive Damages System of this brief. See pp. 9-11, supra.

Alabama, for one, still does not limit juries’ ability to

base their decisions whether to punish and, if so, in what

amount on wholly improper factors such as race, resi-

dency, sex, or corporate status.

The due process concern presented by such standard-

less systems is well expressed in the void-for-vagueness

doctrine, which requires that penal, quasi-penal laws, and

other laws be defined “in a manner that does not encour-

age arbitrary and discriminatory enforcement.” Kolender

v. Lawson, 461 U.S. 352, 357 (1983) (criminal statute) ;

Hoff‘nan Estates v. Flipside, Hoffman Estates, Inc., 455

U.S. 489, 499 (1982) (civil penalties, “quasi-criminal”

ordinance) ; Roberts v. United States Jaycees, 468 U.S.

609 (1984) (civil action based on Minnesota Human

Rights Act). The doctrine’s primary goal is to ensure

that juries and law-enforcement personnel do not “pur-

sue their personal predilections.” Kolender, 461 U.S. at

358. It also aims to reduce “the danger of caprice and

discrimination in the administration of the laws” and to

“permit[] meaningful judicial review.” Roberts, 468 U.S.

at 629.

The Constitution’s antipathy for vague laws finds its

clearest voice in the prohibition “against arbitrary and

discriminatory punishment.” Giaccio v. Pennsylvania,

382 U.S. 399, 402 (1966) (applying Due Process Clause).

See Yick Wo v. Hopkins, 118 U.S. 356, 370 (1886). As

the Court has recognized in a variety of contexts, such

arbitrariness and unjust discrimination cannot be pre-

vented unless punishments are imposed pursuant to cog-

nizable, objective standards. See Gregg v. Georgia, 428

U.S. 153, 189 (1976) (plurality opinion) (“It is cer-

tainly not a novel proposition that discretion in the area

of sentencing be exercised in an informed manner... .

Otherwise, the system cannot function in a consistent and

rational manner.’”’); cf. Giaccio, 382 U.S. at 402 (Due

16

Process Clause violated by “vagueness and the absence

of any standards sufficient to enable defendants to pro-

tect themselves against arbitrary and discriminatory im-

position of costs”). In the absence of such standards,

juries can silently base their decisions to punish, and the

severity of their punishments, upon invidious discrimina-

tion, raw emotion, and even whim. Cf. Santosky v.

Kramer, 455 U.S. 745, 762 (1982) (child custody pro-

ceedings “employ imprecise substantive standards that

leave determinations unusually open to the subjective

values of the judge”). Any punishment so motivated, no

matter how small, would be excessive. See Robinson v.

California, 370 U.S. 660, 667 (1962) (‘Even one day in

prison would be a cruel and unusual punishment for the

‘crime’ of having a common cold.’’).

Punishments therefore must be constrained by cogniz-

able limits and guidelines fixed before the defendant has

acted. See United States v. Batchelder, 442 U.S. 114, 123

(1979) (“vague sentencing provisions may pose consti-

tutional questions if they do not state with sufficient clar-

ity the consequences of violating a given criminal stat-

ute”); Giaccio, 382 U.S. at 405 n.8 (referring to con-

stitutionality of allowing juries “to fix punishment within

legally prescribed limits’’) (emphasis added).

Alabama’s punitive damages laws fall woefully short

of those ininimum due process requirements. By giving

juries unfettered discretion—and especially by telling

juries that they have unfettered discretion—to withhold

or inflict punitive damages, once the requisite misconduct

has been established, Alabama “impermissibly delegates

basic policy matters to . . . juries for resolution on an

ad hoc and subjective basis, with the attendant dangers

of arbitrary and discriminatory application.” Grayned

v. City of Rockford, 408 U.S. 104, 108-09 (1972). Accord

Coates v. Cincinnati, 402 U.S. 611, 614 (1971); Inter-

state Circuit, Inc. v. Dallas, 390 U.S. 676, 684-85 (1968).

In particular, by giving juries no guidance, and instead

17

encouraging them to base their decision whether to pun-

ish on their own unstated values and notions, Alabama

delegates to juries the basic policy matter of what factors

should and should not govern the decision whether to

punish any citizen.

Similarly, by giving juries no guidance for determin-

ing how much punishment should be inflicted, once the

decision to award some punitive damages has been

reached, Alabama impermissibly delegates to juries the

basic policy matter of what factors should and should not

determine the size of punitive damages awards.°

Because of the absence of any jury standard, the great

deference and extremely narrow scope of review applied

» jury verdicts by reviewing courts, and the absence of

any objective standard of judicial review, the Alabama

punitive damages laws are also too vague co permit the

“meaningful judicial review” required by Roberts. In

sum, the Alabama punitive damages laws are impermis-

sibly vague at every level.

As a result, not only are citizens arbitrarily and un-

fairly punished, but the legitimate purposes of punitive

damages are ill-served. Any case-to-case consistency in

the relationship between the severity of punishment and

the gravity of wrongdoing must be purely fortuitous.

Similarly, because juries are not given any guidance re-

garding the principles of deterrence or retribution, any

relationship between those principles and the juries’

awards must be wholly accidental.

5 See Elliott, Why Punitive Damages Don’t Deter Corporate Mis-

conduct Effectively, 40 Ala. L. Rev. 1053, 1055 (1989) (“Today

we no longer recognize unlimited power by juries to make legal

policy based on their own values; the prevailing concept is that

law is a rational instrument to implement the policies of the state.

The notion that individual juries may willy-nilly punish those

who offend them is anomalous in a system of tort law that increas-

ingly conceives of itself as devoted to creating rational incentives

for appropriate levels of safety.’’).

18

Punitive awards imposed by juries with such untram-

meled discretion do not promote proper deterrence. De-

terrence theory assumes that potential actor will ra-

tionally weigh the benefits and costs likely to tow from

contemplated wrongful conduct. Rational deterrence ob-

tains, therefore, only if the actors are informed about

the magnitude of the costs, including punishments, they

are likely to incur if they engage in the proscribed con-

duct. If, as in Alabama, laws fail to establish standards

for punitive damages awards, actors contemplating

wrongful conduct can only guess at the likely conse-

quences of their misdeeds, as they must do in Alabama.

Rational deterrence also requires that punishment be

imposed in the amount, and only in the amount, necessary

to ensure that the actors’ expected costs (i.e., actual costs

adjusted upward to account for the probability that the

conduct will not be detected and successfully prosecuted

by injured persons), will equal any gain that they would

otherwise expect to obtain from the contemplated wrong

conduct. See H. Packer, The Limits of the Criminal

Sanction 45-48 (1968); Ellis, Fairness and Efficiency

in the Law of Punitive Damages, 56 S. Cal. L. Rev. 1,

23-24, 43-53 (1982); Note, Punitive Damages for Libel,

98 Harv. L. Rev. 847, 849-51 (1985). Punishment in any

other amount will either deter desirable activity or fail

to deter undesirable activity.

Punitive awards imposed pursuant to standardless jury

submissions also fail to serve the state’s retributive pur-

poses. The basic test of the propriety of punishment as

retribution is that the punishment must be proportionate

to the wrongdoing. See Wheeler, Toward a Theory of

Limited Punishment: An Examination of the Lighth

Amendment, 24 Stan. L. Rev. 838, 846 (1972). Punitive

damages imposed pursuant to standardless jury sub-

missions violate that proportionality requirement. See

Wheeler, A Proposal for Further Common Law Develop-

ment of the Use of Punitive Damages in Modern Product

Liability Litigation, 40 Ala. L. Rev. 919, 945-46 (1989).

—

19

It is no answer for Alabama and others to assert that

the total absence of standards merely provides for the

exercise of jury discretion. The authority that juries are

exercising is not “discretion in the legal sense of that

term, but . . . mere will. It is purely arbitrary and

acknowledges neither guidance nor restraint.” Yick Wo

v. Hopkins, 118 U.S. at 366-67 (reviewing exercise of dis-

cretion in Fifth Amendment context).

[D]iseretion, to be worthy of the name, is not

unchanneled judgment; it is judgment guided by

reason and kept within bounds. Otherwise, .. .

“lilt is always unknown: It is different in different

men: ... In the best it is oftentimes caprice: In

the worst it is every vice, folly, and passion, to which

human nature is liable.”

McGautha v. California, 402 U.S. 182, 285 (1971) (Bren-

nan, Douglas & Marshall, JJ., dissenting). See also

Bankers Life & Cas. Co. v. Crenshaw, 108 S. Ct. 1645,

1656 (1988) (the “grant of wholly standardless discre-

tion to determine the severity of punishment appears in-

consistent with due process”) (O’Connor & Scalia, JJ.,

concurring in judgment).

Nor is it prohibitively difficult for legislatures or courts

to establish limits on, or objective standards for, punitive

damages awards in order to reduce the risk or scope of

arbitrary and discriminatory actions of juries. Alabama,

for example, has fixed maximum criminal fines for the

entire panoply of criminal acts (see, e.g., Ala. Code § 13A-

5-11 (felonies) ; Ala. Code § 13A-5-12 (misdemeanors and

violations) ; maximum civi! penalties for a wide variety

of civil misconduct (see, e.g., Ala. Code § 2-2-18 (Ala-

bama Pesticide Act); Ala. Code § 8-22-16 (motor fuel

marketing) ; Ala. Code § 9-16-94 (violation of permit con-

dition for surface mining control and reclamation); Ala.

Code § 22-14-14 (regulation of sources of ionizing); Ala.

Code § 22-33-13 (toxic substances in the workplace) ; Ala.

Code § 24-5-12 (mobile homes) ); and maximum punitive

20

mages for still other civil misconduct (see, e.g., Ala.

re 6-5-544 (medical malpractice)). Some of these

fixed civil fines and punitive awards are for conduct that

is similar in effect and culpability to the fraud of Mr.

Ruffin in this case. See, e.g., Ala. Code § 8-19-11 (maxi-

mum civil penalties for deceptive trade practices).

In sum, punitive damages are imposed in Alabama

purcuant to laws that specify no limits, no required rela-

tionship to culpability, no required relationship to the

punishments for other acts of wrongdoing, no other ob-

jective standard for determining when and in what

amount they are to be imposed, and no objective standard

of judicial review. Punitive awards thus imposed serve

no valid state interest. Under these circumstances, the

state’s legislature, or its courts through common law de-

velopment, should be required to “replac(e] arbitrary

and wanton jury discretion with objective standards to

guide, regularize, and make rationally reviewable the

process for imposing [punishment].” Woodson v. North

Carolina, 428 U.S. 280, 303 (1976).’

® As the Court previously has declared, “States have no substan-

tial interest in securing for plaintiffs gratuitous awards of money

damages far in excess of any actual injury.” Gertz v. Robert Welch,

Inc., 418 U.S. at 349.

7 See generally United States v. Evans, 333 U.S. 483, 486 (1948)

(“In our system, so far at least as concerns the federal process,

defining crimes and fixing penalties are legislative, not judicial

functions.”); United States v. Batchelder, 442 U.S. at 125-26

(discussing “the Legislature’s responsibility to fix criminal penal-

ties”); Gregg v. Georgia, 428 U.S. at 174 n.19 (plurality opinion)

(“legislative measures adopted by the people’s chosen representa-

tives provide one important means of ascertaining contemporary

values”).

21

B. Alabama’s Punitive Damages Laws Fail to Provide

Adequate Notice of Who Will Be Punished or of

the Penal Consequences of Conduct that May Be

Punished

Alabama’s punitive damages laws also violate the due

process requirement that statutes be specific enough to

provide “actual notice to citizens” regarding the conse-

quences of their contemplated conduct. Kolender v. Law-

son, 461 U.S. at 357-58. In view of the complete absence

of guidance as to when and in what amount punitive

damages will be inflicted for any type of conduct, it is

beyond dispute that those laws are “so vague that [per-

sons] of common intelligence must necessarily guess at

[their] meaning and differ as to [their] application.”

Roberts, 468 U.S. at 629. Similarly, the vagueness of the

laws precludes the predictability that due process requires

so that potential defendants can structure their conduct

with a reasonable understanding of the consequences. See

Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472

(1985), quoting World-Wide Volkswagen Corp. v. Wood-

son, 444 U.S. 286, 297 (1980).

This absence of notice in laws governing the punish-

ment to be imposed is as unac-eptable to due process prin-

ciples as is an absence of notice in laws describing the con-

duct that triggers punishment. See United States v.

Batchelder, 442 U.S. 114, 123 (1979) (Due Process Clause

applies to penalty provisions that “do not state with suffi-

cient clarity the consequences of violating a given crim-

inal statute”); see also, e.g., Albernaz v. United States,

450 U.S. 333, 342 (1981); Bifuleo v. United States, 447

U.S. 381, 387 (1980). And the requirement of fair notice

applies to penalties that are denominated as “civil,” rather

than “criminal.” * In our legal system, a defendant, civil

8 See, e.g., Giaccio v. Pennsylvania, 382 U.S. at 402 (“[bloth

liberty and property are specifically protected by the Fourteenth

Amendment against any state deprivation which does not meet

the standards of due process, and this protection is not to be

22

or criminal, is entitled to fair warning of the sanctions

that the law can impose on him.

The constitutional necessity for fair notice of penal

consequences is so strong that it is reflected in the Con-

stitution’s explicit proscription of ex post facto laws, a

proscription that invalidates “[e]very law that changes

the punishment, and inflicts a greater punishment, than

the law annexed to the crime, when committed.” Calder

v. Bull, 3 U.S. (1 Dall.) 386, 390 (1798) (Chase, J.,

separate opinion) .°

Without predetermined standards for punishments, that

principle is eviscerated. When a state’s legislature and

courts fail to establish predetermined standards, and leave

to juries’ unchanneled discretion both the decision whether

to punish and the decision of how severely to punish, there

is no effective limit on or consistency of, and therefore no

notice of, the punishment to be applied or enforced. Each

avoided by the simple label [of civil or criminal] a State chooses to

fasten upon its conduct or its statute”); Champlin Refining Co.

v. Corporation Commission, 286 U.S. 210, 240-243 (1932) (the due

process right to fair notice applies to sanctions imposed in a civil

proceeding) ; Cline v. Frink Dairy Co., 274 U.S. 445, 463 (1927)

(“t]he principle of due process of law requiring reasonable cer-

tainty of description in fixing a standard for exacting obedience

from a person in advance has application as well in civil as in

criminal legislation”); Small Co. v. American Sugar Ref. Co., 267

U.S. 233, 239 (1925) (The due process principle of fair notice

is “not such as to be applicable only to criminal prosecutions. It

was not the criminal penalty that was held invalid, but the exaction

of obedience to a rule or standard which was so vague and in-

definite as really to be no rule or standard at all’’).

® Accord Lindsey v. Washington, 301 U.S. 397, 401 (1937) (“The

Constitution forbids the application of any new punitive measure

to a crime already consummated, to the detriment or material dis-

advantage of the wrongdoer.”); In re Medley, 134 U.S. 160, 171

(1890) (“no one can be criminally punished in this country except

according to a law prescribed ... before the imputed offense was

committed, or by some law passed afterwards, by which the pun-

ishment is not increased’”’).

23

jury is left free to base the level of punishment on an

ad hoc, retrospective reaction to the status and charac-

teristics of a particular defendant, rather than on legiti-

mate penal purposes.

For example, because the jury’s decisions whether and

in what amount to award punitive damages are unreview-

able and may be based upon anything at all, it would be

pure happenstance if any particular punitive award were

to be proportionate to the wrongdoing committed or serve

any other legitimate purpose. In other instances of the

same (or more culpable) conduct by other defendants,

juries may have awarded only «- mpensatory damages and

refrained, on the basis of bias, caprice, or sympathy,

from awarding punitive damages. Cf. Furman v. Geor-

gia, 408 U.S. 238, 309-10 (1972) (Stewart, J., concur-

ring) (capital punishment imposed under the challenged

statute was “cruel and unusual in the same way that

being struck by lightning is cruel and unusual. For, of

all the people convicted of [capital crimes], many just

as reprehensible as these, the petitioners [were] among

a capriciously selected random handful upon whom the

sentence of death has in fact been imposed.”). Under

these circumstances, citizens have no notice of the likely

penal consequences of their actions.

In this case, for example, Respondent Pacific Mutual

hardly could have suspected that, solely on the basis of

respondent superior, without any negligence, much less

recklessness or intentional misconduct, on its part, and

without any gain derived by it as a result of its agent’s

unauthorized misconduct, it might be held liable for one

of the largest punitive damages awards ever affirmed by

the Alabama appellate courts. In fact, given what must

have been hundreds of prior judgments in Alabama for

fraud and more serious tortious conduct, given the small

number of prior punitive damages awards exceeding a

million dollars, and given the small amount of compensa-

tory damages involved in this case, the punitive damages

24

award sought and apparently given in this case was quite

unpredictable. See Elliott, supra, 40 Ala. L. Rev. at 1057

(“The central failing of punitive damages that renders

them incompatible with modern tort law is unpredict-

ability.’’).

II. DUE PROCESS REQUIRES THAT ALABAMA

ESTABLISH LEGAL STANDARDS TO DETERMINE

WHEN AND IN WHAT AMOUNT PUNITIVE DAM-

AGES ARE TO BE INFLICTED

The fundamental flaw in Alabama’s punitive damages

system is the combined absences of standards for the de-

termination of whether to award punitive dimages, for

the determination of how large a punitive damages

award may or should be, and for judicial review of puni-

tive damages verdicts. If punitive damages are to con-

tinue to be awarded, that flaw must be remedied by the

adoption, by the Alabama Legislature or the Alabama

courts, of standards to fill the void.

Although an appropriate remedy by this Court may be

to reverse and remand to the Alabama Supreme Court

to enable that court and the Alabama Legislature to

adopt specific standards consistent with general princi-

ples articulated in the opinion to be provided by this

Court, certain requirements are fundamentally necessary

to reduce to an acceptable level the vagueness of the cur-

rent laws.

Juries currently are instructed that a purpose of puni-

tive damages is to deter similar wrongful conduct in the

future. They also should be instructed that society would

be harmed by, and they must not award, punitive dam-

ages in ary amount larger than what is needed to serve

that purpose. They should be instructed that they must

not allow anger or any other emotion they might feel, or

the defendant’s residence, race, or corporate nature, or

any other aspect of its status, to affect either the decision

whether to award punitive damages or the decision of

25

how much to award. This much is needed to prevent

juries from believing that, as the law currently tells

them, they have total discretion in making punitive dam-

ages decisions.

Juries should not be instructed, as they are today, that

a second, separate purpose of punitive damages is “to

punish.” ” Especially when, as under the current sys-

tem, the word “punishment” is left undefined and no

attempt is made to explain to the jury the relationship

between deterrence and punishment or the limits dic-

tated by retributive principles, the articulation of deter-

rence and punishment as separate purposes can only con-

fuse the jury. In addition, punitive damages awarded to

deter will also inflict punishment; the possibility that the

articulation of punishment as a separate purpose in jury

instructions may in some instances result in a punitive

damages award that more closely approximates the retri-

butive ideal cannot justify the greater risk of confusion

and unjust verdicts.

Juries also should be instructed that they must con-

sider the deterrent effect of the compensatory damages

they award and of harm to the defendant’s reputation

and business caused by the litigation, by the compensa-

tory award, and by the stigma that attends a punitive

award of any size. See Wheeler, The Constitutional Case

for Reforming Punitive Damage Procedures, 69 Va. L.

Rev. 269, 309 (1983) (deterrent effect of compensatory

damages); Morris, Punitive Damages in Tort Cases, 44

Harv. L. Rev. 1173, 1182-83 (1967) (same). The trial

court also should inform the jury of the statutory crim-

inal and civil penalties set by the state’s legislature for

similar wrongful acts, and instruct the jury to con-

10 Maine, for example, recognizes deterrence, but not punish-

ment, as a legitimate purpose of punitive damages. Braley v. Berk-

shire Mut. Ins. Co., 440 A.2d 359, 362 (Me. 1982) (“deterrence of

the tortfeasor is ‘the proper justification’ for an award of punitive

damages”) (quoting Foss v. Maine Turnpike Authority, 309 A.2d

339, 345 (1973) (emphasis in original).

26

sider those in determining what amount of punitive dam-

ages, if any, is needed to achieve the proper deterrence.

In reviewing punitive damages verdicts, courts should

be required to consider prior punitive damages awards

for similar and dissimilar conduct and to determine

whether the relationship between the act and punishment

in the case being reviewed is proportional to the relation-

ship between those other acts and punishments. The

courts also should look for guidance to the relationships

between various acts and punishments established by the

legislature in criminal statutes and statutes providing

for specific civil penalties, including specified punitive

damages, such as double or treble damages. If the re-

viewing court finds that the punitive damages award be-

ing reviewed is substantially disproportionate to the de-

fendant’s culpability when compared to those guidelines,

the court should not defer to the jury, but should order

either remittitur or other relief.

In Mathews v. Eldridge, 424 U.S. 319, 335 (1976),

this Court prescribed three factors that must be consid-

ered in determining the level of procedural protection

required before a citizen’s life, liberty, or property may

be taken under color of law:

first, the private interest that will be affected by the

official action; second, the risk of an erroneous depri-

vation of such interest through the procedures used,

and the probable value, if any, of additional or sub-

stitute procedural safeguards; and finally, the gov-

ernment’s interest, including the function involved

and the fiscal and administrative burdens that the

additional or substitute procedural requirement would

entail.

These considerations strongly support the due process

need for more specific punitive damages standards, in-

cluding those suggested above.

First, the seven-figure verdict in this case and the

numerous multi-million-dollar punitive damages verdicts

)

ee

27

being awarded with increasing frequency (see, e.g., cases

cited in n.4, supra) demonstrate conclusively that mas-

sive property takings are occurring in punitive damages

proceedings. In addition, because the avowed purposes of

punitive damages are penal, including to express “social

condemnation and disapproval,” In re Paris Air Crash,

622 F.2d 1315, 1322 (9th Cir.), cert. denied, 449 U.S.

976 (1980), punitive damages impose a stigma that re-

quires heightened procedural protection. See In re Win-

ship, 397 U.S. 358, 363-64 (1970); Wisconsin v. Con-

stantineau, 400 U.S. 433, 436-37 (1971); Wheeler, The

Constitutional Case for Reforming Punitive Damage Pro-

cedures, 69 Va. L. Rev. 269, 280-84 (1983).

Second, as already shown, Alabama’s vague and stand-

ardless punitive damages laws create not just a risk, but

a virtual certainty, of arbitrary, discriminatory, and

therefore erroneous deprivations of property. See pp.

10-11, supra. By reducing the vagueness through specific

standards such as those suggested above, Alabama can

reduce, at least to some extent, the magnitude of the

risk of error.

Finally, reducing the vagueness of the punitive dam-

ages laws will promote the government’s legitimate penal

interests and will do so without any significant fiscal or

administrative burden. Indeed, by making punitive dam-

ages awards more consistent, more predictable, and less

subject to the whim and caprice of unguided juries, gov-

ernments may promote settlements, reduce the number of

lawsuits brought because of the possibility of a windfall

punitive damages verdict, reduce the length of trials, re-

duce the number of appeals, and facilitate judicial review

of punitive damages verdicts. See generally Wheeler,

supra, 69 Va. L. Rev. at 303-20.

28

CONCLUSION

For the foregoing reasons, the judgment of the Ala-

bama Supreme Court should be reversed.

Respectfully submitted,

Of Counsel: MALCOLM E. WHEELER

Counsel of Record

STEPHEN A. BOKAT

NATIONAL CHAMBER LITIGATION SKADDEN, ARPS, SLATE, MEAGHER

CENTER, INC. & FLOM

1615 H Street, N.W. 300 South Grand Avenue

Washington, D.C. 20062 Los Angeles, California 90071

(202) 463-5337 (213) 687-5000

JAN S. AMUNDSON Counsel for Amici Curiae

General Counsel

NATIONAL ASSOCIATION

OF MANUFACTURERS

1331 Pennsylvania Ave., N.W.

Washington, D.C. 20036

(202) 637-3058

DAVID F. ZOLL

Vice President and General Counsel

CHEMICAL MANUFACTURERS ASSOCIATION

2501 M Street, N.W.

Washington, D.C. 20037

(202) 887-1100

NANCY NorpD

AMERICAN CORPORATE COUNSEL ASSOCIATION

1225 Connecticut Avenue, N.W.

Washinvion, D.C. 20036

(202) 296-4522

May 31, 1990